Public v Private sector - take home pay

Belt

When comparing public and private sector jobs which pay same salary, what is the difference in take home pay?

I'm currently job searching at the moment and was wondering what sort of effect mandatory pension contributions and the public pension levy have on take home pay in the public sector so I can factor this into my search.

Would someone be able to illustrate an example for a job which pays €40k lets say?

Gongoozler

Have a go on taxcalc.ie, you can input the gross earnings and select for public sector vs private. There's a fair difference in it.

I'm on a low salary and I pay something like just under 1000 a year in pension levy.

danmanw8

Think long term.

You might get more take home pay today in the private sector but you get no pension unless you make a hefty pension contribution yourself (which would reduce your take home pay)

Private sector pensions are more risky too.

Kristopherus

danmanw8 wrote: »

Think long term.

You might get more take home pay today in the private sector but you get no pension unless you make a hefty pension contribution yourself (which would reduce your take home pay)

Private sector pensions are more risky too.

Well, you do get a Contributory State Pension.

The_Conductor

Kristopherus wrote: »

Well, you do get a Contributory State Pension.

Which is also the vast bulk of the public sector pension.
Under a calculation- known as COPC- while your public sector pension may be 1/2 your career average salary (not your final salary- its changed- though this rarely gets reported)- it is reduced by whatever the contributory pension is.

Aka- you do not get any public sector pension for your first 25k of salary- you only get it on the excess over the 25k- however you pay a pension deduction on your entire salary towards the pension (alongside PRSI which other people pay for a contributory OAP). An 8% deduction on a salary of 35k- means your deduction is only valid for 30%(ish) of your salary- you are in fact paying a deduction of up to 3k per annum- over 40 years for a pension entitlement of 5k on retirement (35k chosen as it is the average salary in the public sector).

People don't often point out how much the pension deduction is- for fear of having the piss taken out of them by people who don't actually understand just how much it is- and who don't know that the contributory old age pension is the primary pension for public sector employees.

This is going to get increasing coverage- as those employed in the public sector for the first time after 1995 start to retire (when the whole PRSI pension deduction thing started in the public sector)............

The Veteran

To give an example. The Open PO competition advertised by PAS showed a salary starting at 79400. The PRD (commonly known as the pension levy) on that is over 6000 so the comparable salary in the private sector is 73,000.

You need to be careful with comparisons ... In the civil service there are no,company cars, no free health insurance, no free train\bus tickets, no bonuses, no commission, etc etc ... In simple terms your salary is your salary.

Conductor is right about the career earnings average now being applied which will depress the final pension for those who have joined recently. The deduction of the contributory pension from a vocational pension is standard fare and civil servants post 95 are in the same boat as those getting a private defined benefit contribution.

The biggest single difference between the public and private sector is the PRD but make sure you understand what the public sector encompasses. It does not include the commercial semi state companies such as the DAA, an Post, Irish Rail, etc.

Belt

What happens If I join the Public Service and pay into the pension for a couple of years but then leave to go back to the private sector? Do I get a refund of my contributions or can it be transferred to a private pension fund? Cheers for the responses, that taxcalc.ie site is very useful for a basic salary comparison

Endthescam

The Veteran wrote: »

To give an example. The Open PO competition advertised by PAS showed a salary starting at 79400. The PRD (commonly known as the pension levy) on that is over 6000 so the comparable salary in the private sector is 73,000.

You need to be careful with comparisons ... In the civil service there are no,company cars, no free health insurance, no free train\bus tickets, no bonuses, no commission, etc etc ... In simple terms your salary is your salary.

Conductor is right about the career earnings average now being applied which will depress the final pension for those who have joined recently. The deduction of the contributory pension from a vocational pension is standard fare and civil servants post 95 are in the same boat as those getting a private defined benefit contribution.

The biggest single difference between the public and private sector is the PRD but make sure you understand what the public sector encompasses. It does not include the commercial semi state companies such as the DAA, an Post, Irish Rail, etc.

You shouldn't assume that the current pension entitlements will be there when you actually retire. Expect them to be much smaller.

Geuze

Belt wrote: »

What happens If I join the Public Service and pay into the pension for a couple of years but then leave to go back to the private sector? Do I get a refund of my contributions or can it be transferred to a private pension fund? Cheers for the responses, that taxcalc.ie site is very useful for a basic salary comparison

If you leave before two years - refund on conts, no preserved benefits.


If you leave after two years - preserved benefits.

The Veteran

Endthescam - legitimate expectations are legally enforceable, it's why the pensions issue is so hard to extract savings from. The payouts have generated savings as the multiplier that applies is smaller but the formula remains the same. Civil servants do not draw from a pension fund, the pension is underwritten by the sovereign.

The_Conductor

Further- the pension reserve fund- which was to fund these (and contributory pensions)- was among the first of the Irish government funds to be raided to rescue the banks.

Contributory pensions- aren't funded either- and non-contributory pensions- by their nature- certainly aren't.

There was a social welfare fund where PRSI deductions were used to build up a nest egg to pay 'towards' future obligations. Its gone too.

We are on track to raise the age of retirement in Ireland to 70. Last year we increased it to 66. It will increase to 67 years in 2021, to 68 years in 2028 and in a further 2 stages to 70 in 2040. Remarkably- this has generated very little attention in the media.

Those who retire before the seminal dates of the rise in age- are no longer allowed draw down the 'transitional pension' they are instead expected to apply for jobseekers allowance.

There was one small little pension time bomb last year (the 1st of January 2014)- when we added a year to the retirement age- we have a small series of these lined up over the next 25 years........

A public sector pension (in the civil service) is earned as 2/80ths of a pension per year of service. I.e. it takes a full 40 years to earn it. If you do your 40 years of service and retire before the revised age of retirement- you are entitled to an actuarial reduced pension- and expected to claim the same jobseekers benefit- as part of your pension. When you do hit the revised age of retirement-at that stage you switch over to the contributory old age pension.There is no onus on Departments to top up pensions to the 1/2 career average salary- or final salary (if you're on one of those schemes) for the intervening period- for someone who has done their 40 years service. Traditionally they may have done- its actually been written into the model pension plan that they don't have to though- get onto your personnel officer and request a copy- it is a bit of an eye opener.

Public sector pension rules were revised significantly in favour of the government, and against employees- something that the public know nothing whatsoever about. It would be wise of any civil servants, and indeed the public sector at large- to request a copy of the pension plan which governs their pension eligibility (there are several different ones)- and familiarise themselves with what their entitlements in the future are- because the stories peddled in the media- are very far from the mark.